Is same-day delivery another e-commerce fad?

 ·5 Mar 2013
Online banking

Same-day delivery, one of the hottest e-commerce trends, is too expensive for most U.S. consumers, raising the risk that this turns into another online shopping fad that goes cold, according to a survey released on Tuesday.

The Boston Consulting Group recently asked 1,500 U.S. consumers what would get them to shop more online and only 9 percent cited same-day delivery. Almost three quarters said free delivery would do the trick, while half of the respondents said lower prices.

The consumers said they would pay $7.50, on average, to get a $50 online purchase delivered on the same day, the survey found. That is lower than the fees charged by most retailers and e-commerce companies now providing these services, the consulting firm noted.

Same-day delivery has become the latest retail battleground, with Wal-Mart Stores Inc, eBay Inc and several other big companies chasing Inc, which has been offering the service on selected items in certain cities since 2009.

Shutl, a startup backed by United Parcel Service, has offered same-day delivery in the UK for three years and will be launching the service in the U.S. in a few weeks.

The U.S. Postal Service and FedEx Corp each have recently started same-day delivery in some areas of the U.S.

But these players may find little room to make money because same-day delivery is destined to be a niche service, The Boston Consulting Group survey concluded.

“The demand for this service and the willingness to pay do not match the cost of providing it,” said Rob Souza, a partner at The Boston Consulting Group, who worked on the survey and has advised companies on same-day delivery.

“We’re pretty skeptical about the ability of a stand-alone business to make money from this,” added Vladimir Lukic, a principal at the consulting firm, who also worked on the survey.

Urban shoppers aged 18 to 34 with household income over $150,000 a year – known as affluent millennials – are more interested in same-day delivery. But this group accounts for only 2 percent of the market, according to the consulting firm’s report.

Consumers said they would only use same-day delivery in certain circumstances, like when they needed to buy a last-minute gift or couldn’t get to a physical store, the survey found.

Retailers should only offer same-day delivery for a select number of products that are small, light, and carry high margins, such as electronics, office supplies, and apparel, but even for these items consumers do not usually want to pay extra to have them shipped swiftly, the report said.

All this means same-day delivery will be a niche service that retailers offer to build customer loyalty, or keep up with rivals, Souza explained.

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